IMF fears for global recovery

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Washington: Action is needed to address the risks to a global recovery threatened by high oil prices and worsening trade imbalances, the International Monetary Fund said after a meeting of top policymakers.

British Chancellor of the Exchequer Gordon Brown, who chairs the IMF's policymaking International Monetary and Financial Committee, said the members agreed that the global economy had improved.

But they also noted "that the recovery has been uneven and with oil prices doubling and global imbalances worsening, we agreed that action must be taken to address risks to the recovery".

Mr Brown said the IMF must address problems, "especially in the most vulnerable countries", and noted that it was "important to have stability in our [oil] markets around reasonable prices".

The IMF panel said it "welcomes the strengthening and broadening of global economic growth in 2004, supported by a strong upturn in global trade, supportive policies and favourable financial market conditions".

The IMF earlier last week projected global growth averaging 5 per cent, the best in three decades. At the same time, IMF officials took note of surging crude oil prices, which closed above $US50 on Friday, a factor that will cut into growth in many industrial and developing nations.

"The committee notes that downside risks to the recovery have recently increased, stemming in part from the increase and volatility in oil prices," the panel's statement said. "These reflect geopolitical tensions, strong global demand and market dynamics. The IMF stands ready to assist members that may be adversely affected."

The IMF panel reiterated the view on the oil market expressed a day earlier by the Group of Seven wealthiest industrial countries that calls for adequate supplies, more conservation and increased transparency in global markets.

"The committee also stresses the importance of dialogue between consumers and producers, and of further progress to improve oil market information and transparency," the IMF statement said. The IMF, like the G7, also expressed a need to improve debt relief for the most impoverished nations but failed to endorse a specific plan or address some calls for a 100-per cent write-off. While Mr Brown reiterated the British proposal to unilaterally write off its share of debt and called on other countries to do the same, the IMF left this for future action.

"So many countries have come to a consensus that we've got to do more," Mr Brown said.

The IMF, which recently extended its program for partial debt relief, said it "looks forward to further consideration of outstanding issues in the proposed framework for debt sustainability, before it is made fully operational, and of further debt relief".